Deforestation: A business-critical issue for the world’s biggest buyers

By Dexter Galvin, head of supply chain, CDP | @GalvinDex

May 25 2017

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Last month, we issued a request to hundreds of companies across Latin America, Europe, the USA and Asia, asking them how they manage the potential impact of their operations on their region’s forests.

The request was sent on behalf of eight major multinational corporations – including France’s leading beauty brand L’Oréal, fast-food giant McDonald’s and Swiss fragrance company Firmenich which produces perfumes for the likes of Georgio Armani and Hugo Boss.

What do these eight big buyers from different industries and different geographies have in common? They all want to know how their businesses might be affected by the increasingly urgent issue of deforestation.

Revenue at risk

The protection of the world’s forests plays a critical role in the fight against climate change, now a global priority after the forging of the Paris Agreement on climate change committing the world’s governments to drastically cut their emissions. Forests absorb around a third of human-caused CO2 emissions, and their destruction itself accounts for 10-15% of global greenhouse gas emissions.

Companies are among the biggest drivers of deforestation. They are creating demand for the four commodities responsible for the majority of forest loss: cattle products, timber products, palm oil and soy. These commodities are found in many of the everyday products and goods that we buy – from a takeaway meal to a bottle of shampoo. Take your average hamburger for example – there’s beef in the patty, palm oil in the bun, and pulp and paper in the packaging.

More and more companies are aware of the issue of deforestation and signing up to zero-deforestation commitments. But with such complex and often opaque supply chains, spiraling across the globe and far removed for their day-to-day, direct operations, how can they influence their suppliers’ behavior in order to affect real change?

The answer lies in their multi-million dollar procurement budgets. By incorporating considerations linked to deforestation into their spending decisions, big buyers can incentivize their suppliers to be transparent about their impacts and take steps to reduce them. Often, this can involve suppliers working with companies in their own supply chains, triggering off a cascade effect of positive action.

Take a company like L’Oréal, which has a commitment in place to source 100% renewable raw materials from sustainable sources by 2020. Palm oil based derivatives are a key component of its shampoo and cosmetics brands for example, so working closely with suppliers is critical for the company to achieve its zero deforestation goal.

Another example is McDonald’s, which has a commitment to end deforestation in its beef, poultry, palm oil, coffee and fiber supply chains. In its beef supply chain, the company is already using a geospatial mapping and auditing tool to map the origins of beef sourced in Brazil back to the last farm. Working with CDP enables McDonald’s to take this to the next level, helping it to understand not just where but how its beef is being produced, provide support to suppliers to improve their practices, and gain fresh insights from partners on the ground.

And the effects can multiply. Last year for example, over 300 key suppliers in North America reported that they are actively working to influence their own suppliers’ sustainability practices. These companies alone have the potential to influence the behavior of over one million suppliers worldwide.

Likewise, companies working with their suppliers on deforestation have the potential to transform the way commodities are produced and safeguard the future of the world's forests. This makes sense for both the planet and the bottom line.